Generation X, those born between 1966 and 1981, are feeling the financial squeeze. A Franklin Templeton survey made headlines this week as it revealed that many Gen Xers are being stretched beyond their financial limits. One quarter of Generation X have saved nothing for retirement, with many citing too low of income and/or too high of expenses as the main reason for their lack of savings.

While these surveys claim to reveal shocking truths about our lack of savings (e.g. Millennials spend more on coffee than they save for retirement) the results aren’t that surprising when you think about it. For example, Gen X is feeling the squeeze precisely because at age 37-52 they are in the most expensive years of their lives – raising kids, mortgage payments, rising grocery bills, more need or desire for two vehicles, soaring gas prices, to name a few.

As a Gen Xer myself, about to turn 39 this summer, I can fully relate to the stress. I want to be further ahead financially (and I HAVE my financial sh!t together) but the demands of a growing family, rising prices, and lack of wage growth have slowed our progress. I rely on my side hustle – blogging, freelance writing, fee-only advising – to help accelerate our financial goals. But those who don’t have the desire or aptitude to earn extra income or live ultra-frugal will find themselves struggling during this hectic period of their lives.

Instead of throwing labels around like selfish, entitled, or ‘bad at money’, I prefer behavioural economist Dan Ariely’s viewpoint, which is that we’re all humans wired a certain way, and our behaviour is more a product of our environment. What external factors are at work during your transformative years? What kind of demands are we faced with during the already difficult child-rearing years? What type of economy are we living through when it comes close to retirement?

Who’s the more confident retiree? One who was blessed with a 10-year bull market during their highest earning years, or one who was downsized during a recession and the greatest stock market crash of our lifetime?

Of course Generation X is feeling the squeeze. We have to balance today’s expensive reality with tomorrow’s future needs. I try and achieve that balance by being mindful of my spending, which means tracking expenses and planning for short-and-medium-term goals, automating my savings so I don’t even miss the money coming out of my chequing account on pay day, and tempering expectations by understanding that I can’t afford to do everything right now – there has to be trade-offs and sacrifices made.

Anyone else feeling the squeeze?

This Week’s Recap:

On Monday I compared the debt avalanche and debt snowball methods to see which approach gets you out of debt faster.

And on Wednesday Marie looked at money trade-offs and opportunity costs.

Weekend Reading:

Speaking of squeezed, why Rob Carrick pities the two-vehicle family with a mortgage up for renewal this spring.

Two lessons from Morgan Housel on how to plan for and deal with the unexpected.

Wealthsimple’s Michael Katchen had a big, simple idea: An investing revolution that’s winning over millennials. Can he beat the big banks, too?

Jonathan Clements asks, what does grown-up money look like? Turns out it’s less about the size of your nest egg—and more about attitude.

You’re a saver but you married a spender. Here’s how couples can balance love and money.

Rob Carrick discusses whether you should consider your house as an investment or a consumable good with Doug Hoyes, author of ‘Straight Talk On Your Money’:

How pension expert Sheryl Smolkin invests her money – and her best advice for investors.

Michael James shares an example of loss aversion – the idea that losing an amount of money, say $1000, feels worse than winning the same amount will feel good.

Million Dollar Journey blogger Frugal Trader shares his wife’s investment portfolio and strategy.

If you enjoy the Canadian Couch Potato podcast then this episode featuring A Wealth of Common Sense blogger Ben Carlson is a must-listen.

Dividend investor John Heinzl explains how a company’s price-to-earnings ratio can lead you astray:

“When you’re looking at a P/E ratio, you need to understand how it’s measured and evaluate it in the context of a company’s earnings and cash flow growth. Generally, companies that are growing rapidly will have higher P/Es, while slow-growing companies will have lower P/Es.”

Finally, a look at how tiny Carthage College’s endowment returns beat those of Harvard’s giant $37B endowment by using index funds.

Have a great weekend, everyone!

Newly engaged Jared and Maryam are excited to be planning their future wedding. The average cost of a wedding in Canada in 2017 was over $42,000. That’s a lot of money for a party. They could go all out and have the wedding of their dreams and conform to what’s expected of them. Or, they could plan a more modest wedding with just their dearest family and friends and use the remaining money towards something they may value more – a down payment on a house or start the small graphic arts business they’ve been mulling over, or Maryam could return to university to continue her graduate degree in environmental science.

Everything is a trade-off. If we take on an expensive car lease, we will have less for our summer vacation. If we opt to splurge on our summer vacation, we won’t have as much for savings. If we decide to save like crazy for retirement and the kids’ university education, we won’t be able to buy as big a house.

None of these decisions is necessarily bad. But they are choices. When you choose one thing over another you’re saying you value this more than the other choice you had. The problems arise when we’re often not consciously aware of why we make our decisions – both the reasons why we should and why we shouldn’t. In our day to day living, for the most part, we don’t think about the things we’re giving up.

Buying takeout for lunch occasionally is not a bad decision, especially if it gets you out of the office for a breather. However, buying one cheeseburger every day for the next 25 years could lead to missed opportunities. Aside from the potential harmful health effects, investing that money can give you a sizeable lump sum towards one or more of your goals.

We can’t have it all and that means we need to make tough financial choices. Instead of haphazardly spending here and saving there, consider the implications.

Your Money Trade-Offs

A father thinks, “I’m working mega hours to provide for my family.” The trade-off is actually spending time with his family. (Listen to Harry Chapin’s “Cats in the Cradle” to see how that can turn out.)

A beginning entrepreneur often does all the work herself rather than hiring a part-time assistant for $20 an hour who can take over the routine tasks while she focuses on what she does best with more available time, and potentially earning much more.

Fred wants to spend the weekend in Atlanta partying with his friends. He’ll get back to his debt repayment program later on when the bills come in.

Have you ever made a decision between two investments, stocks or funds and found that the one you didn’t choose is suddenly outperforming?

Doling out dollars

Most of us can’t possibly afford to do it all. We don’t have unlimited choices because we are constrained by our incomes. Besides, a hefty portion of our paycheque is usually already spoken for – mortgage or rent, car payments, utilities and food. So, it’s important to make conscious choices.

Since our paycheques are limited, we need to make three basic choices:

1. Decide whether to purchase one item versus purchasing another.
2. Weigh whether to purchase something today versus saving for tomorrow.
3. When we save for tomorrow we have to decide what we want to save for.

We have to decide what is essential, what appeals to our interests and values, and what is merely desirable.

Often, the temptation is to put off saving for retirement and instead deal with goals in the order they occur – buying a house in your thirties, paying for the children’s education in your forties and then saving for retirement in your fifties. But financially it makes sense to deal with goals concurrently rather than consecutively – save for retirement right away, scale back on the house, trim down the college funding.

Final thoughts

The reality is we can’t have it all. To get one thing, we usually have to give up something else. Financial planning is a method of consciously deciding how to allocate our resources, whether money or time.

We’re not always going to make the best choices. As we get older there’s a good chance we’ll have at least some regrets about decisions we’ve made, paths not taken, or how we behaved. If we knew then what we know now, we might have made better choices. Our choices put us in the situation we’re in now and made us into the person we are now.